Shops & Walk site to go back to Ocala

OCALA - In the legal standoff between bankrupt City Shops & Walk developer Jorge Gutman and the city of Ocala, Gutman on Friday blinked.

By Fred HiersStaff writer

OCALA - In the legal standoff between bankrupt City Shops & Walk developer Jorge Gutman and the city of Ocala, Gutman on Friday blinked.Assistant City Attorney James Gooding said a bankruptcy hearing in Fort Lauderdale scheduled for Monday between Ocala and Gutman's JJH Investments LLC was canceled when Gutman's lawyer agreed Friday to no longer stand in the way of the city getting back its downtown land from the developer.City officials say the land should be back in their hands within three months.The city had petitioned bankruptcy judge Raymond Ray earlier this fall to void JJH Investments' request for bankruptcy protection, saying Gutman was using the filing to try to stall his creditors, instead of legitimately reorganizing his company, for which bankruptcy laws were intended. Gutman was fighting the charge."This was a bad faith bankruptcy filing," Gooding said Monday of Gutman's request for bankruptcy protection.Gooding said Gutman's South Florida lawyer, Kevin Gleason, agreed not to fight the city's request that the property be excluded from bankruptcy protection in exchange for the city not fighting JJH's bankruptcy claims involving other creditors or property.All told, Gutman's JJH Investments' deal with the city involved $3.5 million as part of the City Shops & Walk project, a 40,000-square-foot open-air residential and retail complex that was supposed to be built near the downtown square and across from City Hall.The city had agreed to give Gutman the downtown land and hold a $1.9 million mortgage for the property. If JJH Investments built the project, the company wouldn't have to pay back $1 million of that mortgage. In addition, the city gave JJH Investments an unsecured loan of $1.5 million to jump-start the project.Gooding said the project had two phases. The first was to build on the previously owned city land, and the second was for Gutman to buy property next door owned by communications company Sprint. Instead, Sprint wanted to sell its property immediately, so Gutman used the $1.5 million loaned him by the city to buy the Sprint land and building.The project came to a halt in July 2007 after JJH Investments couldn't pay some of its contractors, violated its development agreement with the city and missed a mortgage payment.

City Councilman Charles Ruse said the city was too eager to get downtown developed."We just wanted it too bad, and when you want something too bad you don't look for problems," Ruse said. "People were delusional. We were not analytical."Ruse, who voted for the deal with Gutman, said the city probably will look for another firm interested in developing the property, once the city regains control.Ruse said that the next time, however, he will try to put together a deal that doesn't involve the city giving money to the developer, but instead offer some form of tax break to help jump-start the project.In August, the city was planning to auction off the property, which would have allowed Ocala to buy it back. But Gutman had filed for bankruptcy the day before, essentially freezing the property and stymieing creditors' efforts to get what they say Gutman owes them.In a letter to the City Council dated Aug. 5, Gutman threatened that he would file for bankruptcy and "further delay the [foreclosure] litigation" if the elected officials did not accept his offer to deed the property over to the city."We think he was trying to convince the city to take back the property without [the city] pursuing JJH or Gutman and recovering the money they owed us," Gooding said.The council did not accept the offer. That's because other contractors that worked on the project had filed liens against the downtown property in hopes of getting paid. In order for Ocala to reclaim the property with a clear title, the city still had to go through foreclosure, Gooding said.Even when the land returns to city ownership, Gutman won't be off the hook entirely.The city will still pursue Gutman for the $1.5 million that it loaned him to jump-start City Shops & Walk.

If the property is put back on the auction block, Gooding said it's unlikely it will sell for the full amount the city has wrapped up in the deal.Ray, the bankruptcy judge, is expected to sign the city agreement in the next few days.JJH attorney Gleason did not return phone calls Monday.

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